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US Licensing Sector Back to Robust Pre-recession Health Levels

Disney, the world's biggest licensor, stole the show at this year's Las Vegas Licensing Expo, though there was also an impressive showing from one-time online icons, traditional toys going virtual, a loquacious bulldog and an irascible cat.

Photo: Panda-ing to market demands: ever more movie merchandise.
Panda-ing to market demands: ever more movie merchandise.
Photo: Panda-ing to market demands: ever more movie merchandise.
Panda-ing to market demands: ever more movie merchandise.

Walking into Las Vegas' Licensing Expo 2014 was like walking into the world's weirdest theme park-cum-shopping mall. To the right, a 3D dinosaur roared in your face. To the left, Sherlock looked down from a giant screen. Following the signs to Star Wars, you passed a group of Stormtroopers talking to a giggling mini-Marilyn. While getting your nails done with signature Coca-Cola polish, you had the option of investing in an item of Downton Abbey collectible jewellery. This is the world of licensing partnerships, spanning the gap between the physical and virtual worlds and raking in billions in the process.

At this year's event, the showfloor was divided into four areas – Art and Design, Characters and Entertainment, Agents and Brands, and Fashion. Every product category – from toys and games to automotive, mobile and home décor – was well-represented, at least according to the show organisers. Of particular note was the new Motorsports Café – sponsored by Shell – that focussed on the growing motorsports licensing sector. Meanwhile, across the hall, the expanded Sourcing and Production Zone offered brands and designers innovative channels for turning their ideas into actual products.

Chris DeMoulin, President of Licensing and Executive Vice President of Customer Development at Advanstar Licensing, organiser of the show, saw the structure of this year's show as something of a step forward. He said: "This industry has very clear segments, so that's how we organised the floor. It has made navigation simple and has been very successful." His optimism was backed by the exhibitor figures for this year – apparel and accessories up 14%, food and beverage up 12%, and publishing up 10%.

Overall, the licensing industry seems to have seen a return to its robust pre-recession levels. According to a recent report by the International Licensing Industry Merchandisers' Association (LIMA), sales of goods related to movie and TV characters, corporate trademarks, sports, fashion and collegiate brands helped drive up royalty revenue by 3.3% to US$5.63 billion in 2013. In terms of total retail sales, licensing is said to have accounted for a 3.2% boost, seeing the sector top $115.75 billion last year. Character-related merchandise, mainly in the children's toy sector, continues to be the primary driving force of the industry. At the same time, though, there's been significant growth in digital properties, clothing, automotive and sports.

Not a Mickey Mouse business

The world's largest licensor – The Walt Disney Company – was represented in a special section of the convention centre, away from the actual showfloor. For the first time ever, iconic characters from its four powerhouse brands – Disney, Disney-Pixar, Marvel, and Star Wars stood together on stage, resulting in a somewhat surreal experience for attendees.

The company's growth in 2014 was fueled by leveraging new content, while expanding the Marvel and Lucasfilm properties into new categories and growing established franchises – most notably Disney Princess, Mickey and Minnie Mouse, Cars, and Spider-Man. In the same year, Frozen, its animated smash, became a breakout hit raking in more than $1 billion at the global box office. Dolls of Elsa Frozen's heroine – and other merchandise related to the movie sold better than any other licensed toys in the first three months of the year, according to figures from the NPD Group.

Summing up a good year for the company, Josh Silverman, Disney Consumer Products Executive Vice President of Global Licensing, said: "Frozen has been an incredible phenomenon for us. The Princess universe has also got a lot of things happening. There's a live-action Cinderella coming out, which is rich in storytelling. Overall, we're trying to manifest and deliver products that continue the experience and bring it to life."

Photo: Grumpy Cat.
Grumpy Cat.
Photo: Grumpy Cat.
Grumpy Cat.
Photo: Tetchy Tyrannosaur.
Tetchy Tyrannosaur.
Photo: Tetchy Tyrannosaur.
Tetchy Tyrannosaur.

That experience is now likely to continue through a number of high-profile upcoming properties, with  attendees invited to see a presentation of just a smattering of them – Star Wars: Episode VII, Avengers: Age of Ultron, Guardians of the Galaxy, and two animated films, Inside Out and Big Hero 6.

A number of other upcoming films also generated considerable excitement among the licensing fraternity. Chief among these were Jurassic World (Universal), How to Train Your Dragon 2 and Kung Fu Panda 3 (both from DWA), and Alvin and the Chipmunks 4 and Ice Age 5 (both from Fox).

Digital gets physical

According to a number of attendees at this year's event, brands are getting increasingly more creative when it comes to bridging the virtual and physical play spaces. Earlier this year, Lego introduced its Fusion platform. This allows users to build something out of actual Lego pieces, take a photo and then watch the object come alive in a virtual world via a dedicated app. Minecraft, a popular game involving the breaking and placing of blocks, is taking the opposite approach. It now offers its participants the opportunity to print out their virtual creations on 3D printers.

Even traditional toys have now taken on a virtual life. Lalaloopsy, a range of plastic rag dolls from MGA Entertainment, for example, now has an online university, complete with games and crafts. Explaining the thinking, Jennifer Campana, Director of PR for MGA, said: "It used to be you had a TV show and a doll. Now we're looking to extend the experiences and suggest play through content. We're reaching girls through our website and the app. We're also creating a lot of content to go live on YouTube and Netflix. We're also exploring the idea of the girls printing out their own fashions [via 3D printers] but we're still at a point where it takes three hours to output an outfit."

A number of companies are now also looking at digital as way to enter a new market, rather than as a subsequent brand extension. Fico, a Brazilian clothing brand, is taking this approach in its bid to break into the US children's clothes market. As a means of getting kids and parents excited about its surf wear range, it is launching a game app – Go Surf – specifically aimed at toddlers to six-year-olds. Raphael Levy, Fico's founder, said: "It is extremely hard to tap into the US market so we're beginning with a game. Hopefully, after a while, we'll then be able to find a US licensee to produce the clothes."

Characters born from digital and mobile platforms were increasingly the focus of conversations at the HKTDC pavilion. This was partly driven by the continual growth in the number of social network games developed for web and smartphones.

Confirming this abiding interest, Teresa Hung, Business Development Officer for the HKTDC's Los Angeles Office, said: "People are still interested in movie-related characters for toys, but we're seeing game-related properties take off a lot more now and expect their growth to continue over the next few years." Bearing out Hung's supposition, while Angry Birds may be past its prime, icons from Candy Crush, Moshi Monsters and Farm Heroes appeared across thousands of toys and other products, proving the undeniable viability of licensing online characters.

Pet projects

In another noticeable shift, the popularity of pet-inspired brands continued to grow apace. Grumpy Cat, a creature known for its cynical charm, made a celebrity appearance and shared its endearing scepticism with a delighted audience. While it started life as an internet meme, Grumpy Cat has now spawned a slew of spin-off products, including toys and coffee drinks. With the cat now moving to the big screen with a mooted movie debut, it is likely to become ever more ubiquitous.

The makers of From Frank, a brand inspired by Frank, a French bulldog, were not quite as far down their licensing journey as the irritable feline, but have already enjoyed significant success through quirky postcards and magnets. Kate Smith, Frank's owner, developed the initial idea into a line of greeting cards and gift products (now available at Target, one of the leading mass market retailers in the US) in just under five years. Modestly describing the process, she said: "We'd 'talk' for Frank at home and thought that maybe other people would also find it funny." At the show, she was looking for licensing opportunities in video and animation, as well as hoping to extend her line of stationery gift products.

Photo: A couple of characters from Hong Kong…
A couple of characters from Hong Kong…
Photo: A couple of characters from Hong Kong…
A couple of characters from Hong Kong…

Licensing Expo 2014 was held 17-19 June at the Mandalay Bay Convention Center in Las Vegas. The event attracted around 15,000 licensing professionals.

Anna Huddleston, Special Correspondent, Las Vegas

Content provided by Picture: HKTDC Research
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